Today in Economic Nonsense: Richard Shelby

June 13, 2011

A lot of us are begging, even pleading, with President Obama to focus more on economic stimulus and less on deficit reduction. But let's not kid ourselves. President Obama isn't the obstacle to passing a new jobs program. The Republican Party is.

I believe that stimulus basically doesn't work for the most part. We've tried that. The market grows the economy. We've grown the government, but we haven't grown the economy.

Just the opposite is true. According to the very best evidence we have, the Recovery Act prevented the economic downturn from becoming a full-brown depression or something very close to it. And private sector employment has been growing, albeit in fits and starts. The primary reason employment overall isn't growing faster is that public sector workforces are shrinking, because low tax revenues are forcing local and state governments to balance their budgets with spending cuts.

If the federal government, which has the ability to borrow money, had simply maintained the assistance it provided after the Recovery Act expired, many more people would have jobs. And what would have worked a few months ago would still work today: Extending new assistance to the states would boost employment, by (among other things) keeping teachers, first responders, and plenty of other government workers from losing their positions.

Of course, economic nonsense from Shelby is nothing new. Remember, this is the guy who blocked MIT professor Peter Diamond from joining the Federal Reserve Board because, supposedly, the Nobel-winning economist wasn't qualified to serve there. But I don't think Shelby's argument, which other Republicans invoke all the time, is really about ignorance. It's about ideological rigidity (government is always bad) and partisan opportunism.

For the moment, Republicans have no interest in moving the nation’s debate toward investments in job creation because they gain twice over from keeping Washington mired in discussions on the deficit. It’s a brute fact that Republicans benefit if the economy stays sluggish.